A spokesman for Deutsche Bank declined to comment on the legislation, but sources within the bank said local staff were unlikely to be affected because few were paid a bonus in excess of one year’s salary.

Spokeswomen at UBS and Credit Suisse also declined to comment. Sources said the rules were unlikely to apply because Switzerland was not a member of the European Union.

Excessive bonuses

European Commission president José Manuel Barroso told The New York Times the cap on bonuses was aimed at curbing short-term, destructive behaviour. “The rules will put an end to the culture of excessive bonuses, which encouraged risk-taking for short-term gains," he said. “This is a question of fairness. If taxpayers are being asked to pick up the bill after the financial crisis, banks must also make a contribution."

European banks with operations in Australia include Deutsche Bank, Barclays, the Royal Bank of Scotland, BNP Paribas, Société Générale, and Crédit Agricole.

The rules are part of an overhaul of European banking legislation, and the bonus limits are expected to take effect on 2014 payouts. The 27 member states of the European Union must still give formal approval to the plan.

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Bankers in Britain and Europe complained the legislation would cause an exodus of talent from financial centres such as London and make the region less competitive globally.

Excessive bonuses were notoriously rife at proprietary trading desks, the divisions charged with investing a banks’ own capital for profit.

Lax oversight within these divisions led to high-profile, multibillion-dollar losses at JPMorgan and UBS in recent years.

Most investment banks in Australia have now closed their proprietary trading desks.

Base salaries on the rise

Compensation is generally lower at investment banks since the financial crisis, but most banks in Australia have increased base salaries by about 30 per cent in anticipation of caps on bonuses. The shift has turned wages into a fixed cost for banks and resulted in a significantly greater number of redundancies in the financial sector over the past 12 months.

European politicians also are contemplating caps on pay for asset managers, although legislators remain divided on how any potential bonus restrictions should be structured.

In Australia on Wednesday, federal Treasury released draft regulations requiring corporations to disclose remuneration paid to key management personnel, along with certain other transactions. They will replace existing accounting standards the Australian Accounting Standards Board will withdraw from July 1 because the board considered they were “more in the nature of governance disclosures that are better dealt with in the legislation, rather than by the accounting standards", Treasury’s explanatory statement said.